Many Maryland homeowners are rejoicing in the recent increase in house prices, but buyers seem to have been feeling a little less secure. Are Maryland residents going to rent in the near future?
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The Cost of a Home in Maryland
According to Zillow, the average cost of a property in Maryland is currently $406,436 and rose by 9.8% in a year. Redfin reports median sales prices to have risen by 8.8%. Although the national average cost of homes rose by 18.2%, it is currently $355,852 according to the first source, Zillow. Keep in mind that this value only includes the middle price tier of homes and is seasonally adjusted. Regardless, the value of Maryland properties has been on the rise.
Maryland House Sales
Redfin goes on to report that 21.6% fewer homes have sold over a period of a year. Fewer houses also went on sale by 10.4%. This means that while house prices increased, there were not many interested buyers. Another possible explanation is that potential buyers simply could not afford the cost of a house in Maryland. Regardless of the cause, the price of a home has increased while home sales have fallen. It remains to be seen whether this trend will continue in the coming months, but so far Maryland residents do not seem keen to purchase a home.
Did Higher Prices Deter Buyers?
It is likely the increase in house prices in Maryland is what deterred most potential buyers from purchasing property in the state. Because many people now cannot afford to buy a home in Maryland, they might decide to rent instead. However, renting is not cheap either, as Maryland renting prices continue to rapidly go up as well. Landlords keep increasing rent prices continually.
Even though this is true, many people might prefer to rent a property, as they do not have to pay an upfront cost and commit to staying at a single property. There are other cost benefits to renting a property as well. For example, renters do not need to maintain or repair the property. It is also easier to move if a tenant has to move for a job or for school purposes. Renters also may not need to invest in furniture. It is further important to note that renters’ insurance tends to generally be significantly cheaper than homeowners’ insurance. For these reasons, many Maryland residents may choose to rent instead of buy.
Another important factor to consider is that data has shown that some people are leaving Maryland for a variety of reasons, like job opportunities.
Renters need to pay an appropriate amount of renters’ insurance. A renters’ insurance policy covers items that could get destroyed in an incident or an accident. A few factors that will determine the sum of renters’ insurance will be the zip code, credit score, age, and history of applicants. The type of coverage they will request will also play a part.
Likewise, homeowners’ insurance covers damage and theft to the property and items, and various factors are considered before quoting applicants. Before taking out a policy, it is important to consider the value of the home and the items within it. This is to determine whether it is appropriately priced and whether another policy with higher coverage is needed.
Insurance is a part of both homeowners’ and renters’ budgeting when they are getting ready to move properties. While the price of insurance for renters varies, renters’ insurance tends to be a lot cheaper than other types of property insurance. It may be another reason Maryland residents might decide to become renters rather than homebuyers. Renters’ insurance in the state of Washington DC can be as low as $157 (Trusted Choice), while homeowners’ insurance averages at $897 (Bankrate).
Why are House Costs in Maryland on the Increase
The observable rise in house prices is not exclusive to Maryland but is present throughout the United States. In May, the average US house price hit an all-time peak. This is mainly because there is a low number of houses that are available for sale. But why?
After the peak of the COVID-19 pandemic, the costs of houses immediately went up and caused a national dip in sales and an upward trend in rental and housing costs. Even before COVID-19, however, there has been an imbalance in housing supply and demand. There have been fewer houses built between the year 2000 and the year 2020, which also caused prices to increase. Another reason house prices have gone up may be that many properties are bought by investors, not individuals.
The increase in house prices is also due to other economic changes. For example, interest rates, zoning regulations, costs of building, and policy changes have affected the cost of buying a home. As a result, many people cannot afford to buy a house without taking out a mortgage or a home equity loan. Even then, buying a house is expensive for many.
Renting vs Buying
In summary, the costs of Maryland homes went up, while sales went down. Some residents have also left Maryland in recent years. However, even though the costs of rented properties are going up as well, it may be that Maryland residents will rent more often than they will buy. Unlike bought homes, rented properties do not need a large sum to be paid for a deposit upfront. While the landlord will likely want a deposit, the sum will be lower.
Furthermore, when renting, the tenant does not have to shell out large sums of money for repairs and renovations on the property because it is not their property. Rented properties also tend to have cheaper insurance.
In addition, there are factors that are not related to current events, but still might be affecting Maryland’s residents’ choices. For instance, families with children may prefer to rent rather than own due to the financial implications of raising children. Likewise, individuals whose jobs require them to move frequently may find renting a more attractive option than owning. These lifestyle factors may affect whether or not an individual or family decides to buy a house or rent. One thing is for sure, however – the residents of Maryland have been hesitant to purchase a home in recent months.